Back to data watching, with US debt bill on track

With the U.S. debt ceiling bill clearing an important procedural hurdle en route to a vote in the House of Representatives on Wednesday, markets are back in data-watching mode for now.

Unfortunately, there’s little respite on that front given disappointing economic activity and persistently elevated inflation data out of Asia.

China’s official PMIs indicated a faster-than-expected contraction in manufacturing activity and slower growth in services in May. That followed consistently weak economic releases for April, suggesting the post-COVID reopening bounce has run out of steam.

Forecast-beating Australian consumer prices, released at exactly the same time, appeared to back up Reserve Bank of Australia Governor Philip Lowe’s earlier warning that risks to inflation are on the upside, keeping rate hike bets alive.

The Aussie dollar’s volatile reaction sums up the mood – the risk-sensitive currency bounced initially on the CPI release before more than reversing its gains due to the bleak Chinese data.

********

Asian stock markets fell and even U.S. equity futures turned negative despite the debt ceiling reprieve, while China’s yuan promptly skidded to fresh six-month lows, giving the U.S. dollar a broad boost.

News of a North Korean satellite launch and intensifying fighting in Ukraine only added to the grim backdrop.

Europe’s calendar is likely to be dominated by national CPI releases from France, Germany, and Italy for May ahead of Thursday’s flash euro zone inflation number. Italy’s first-quarter GDP and the European Central Bank’s biannual Financial Stability Review are also due.

In the U.S., the Federal Reserve’s Beige Book will be of interest and a number of Fed officials are also scheduled to speak. But much of the focus will, of course, be on the House debate over the debt ceiling bill.

(Sonali Desai)

*****

European Futures fall as China’s factories falter 

European futures are in negative territory as China’s weak factory activity figures offered the latest evidence that recovery in the world’s second-biggest economy is faltering.

Data showed China’s manufacturing activity PMI fell to 48.2 for May, contracting even faster than expected.

On a brighter note, there are signs inflation is easing in Germany. Data from the country’s most populous state, North Rhine-Westphalia, showed inflation cooled in May. Nationwide inflation data is due at 1200 GMT.

Also on focus today, legislation brokered by President Joe Biden and House Speaker Kevin McCarthy to lift the USD 31.4 trillion U.S. debt ceiling and achieve new federal spending cuts passed an important hurdle late on Tuesday, advancing to the full House of Representatives for debate and an expected vote on passage on Wednesday. The House Rules Committee voted 7-6 to approve the rules allowing debate by the full chamber.]

(Joice Alves)

*****